Gold in your portfolio: What to expect from the safe-haven asset in volatile times
While most experts remain optimistic about gold, citing a macroeconomic backdrop that continues to favor it, some warn of short-term risks.
MUMBAI : Elevated inflation risks, volatility in global equity markets, and steady physical demand from India and China have together reinforced gold’s role as a portfolio stabilizer at a time when economic visibility remains poor.
Gold has continued to attract investors for its safe-haven status amid currency weakness and geopolitical stress. Gold exchange-traded funds (ETFs) have delivered over 70% returns in 2025 (as of 22 December 2025).
Experts remain optimistic on gold, arguing that the broader macro environment continues to tilt in its favour.
The foundations of a prolonged gold bull market remain intact, even if volatility and headline-driven swings persist, according to Chirag Mehta, chief investment officer at Quantum Mutual Fund. A potential slowdown in the US economy, particularly visible through labour market data, could eventually push the US Federal Reserve towards easing monetary conditions. If that shift coincides with a renewed inflationary impulse, the resulting mix of lower real rates and policy uncertainty would create a highly supportive backdrop for gold to extend its gains, he said.
“Gold is expected to do well for a sustained period. There could be a healthy correction as and when there is normalcy, but we expect it to be a healthy correction before the next leg of the rally," said Manav Modi, analyst, precious metal research at Motilal Oswal Financial Services.
Short-term concerns
However, in the near term, experts remain cautious about gold. “We expect the gold price to trade within a firm range while expecting consolidation and volatility in the short term due to Fed rate speculation, along with future guidance over US economic health, the release of US economic data and year-end portfolio shuffling. The strong economic data from the US and successful trade deals are the temporary downside risk factors for gold prices," said Tata Mutual Fund in a note.
"The broad fundamentals are still positive for medium- to long-term, and investors may continue to hold gold or accumulate through systematic investment plans or in a staggered manner," the December note added.
“Gold has delivered strong returns recently, but investors should not assume it is a low-volatility safe haven. In dollar terms, gold has been highly volatile historically and has gone through prolonged and deep drawdowns after sharp rallies, with recovery periods often stretching far longer," said Devina Mehra, chairperson and founder of First Global.
She added that much of gold’s strong performance in rupee terms reflects currency depreciation rather than price stability. Gold plays a role in portfolios, but investors must approach it with an understanding of its cyclical nature.
Beyond cyclical drivers, structural forces are also playing an increasingly important role. US public debt has reached record levels, while policy responses across developed economies are increasingly relying on liquidity support. In this environment, central banks have steadily diversified reserves away from fiat currencies, with gold emerging as a preferred alternative. Central-bank buying has remained a key pillar of demand, lending durability to prices even during periods of risk-on sentiment.
This official-sector demand, combined with continued jewellery consumption from Asia, has helped cushion downside risks.
Currency dynamics further strengthen the case for gold for Indian investors. A weakening rupee amplifies returns from dollar-priced commodities, making gold not just a hedge against global uncertainty but also against domestic currency erosion.
Mehta suggested that investors typically allocate around 15% of their portfolio to gold, with staggered investments preferred for those under-allocated or just beginning to build exposure.
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